A SURVEY published by the US Securities and Exchange Commission (SEC) has found that retail investors rely heavily on financial advisors for their investment decisions and rarely use the SEC’s website or blogs for investment information.
The survey found that while 51% of investors said their financial advisors or brokers were their “main source” of information, only 16% rated the Internet as their main source. And while 90% of investors have Internet access, just 56% use the Internet in their investment decisions. Fully 44% said they did not use it at all.
Among those who do use the web for their investing, only 1% cited the SEC’s website as a source while 13% said they use blogs.
Interestingly, individual company websites were the most often cited source by those who use the web in their investment decisions, but only 38% say they use them.
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| Retail investors rely heavily on their financial advisors or brokers for investment information. The Internet trails a distant second. |
Last week, the SEC moved to encourage companies to improve their corporate investor relations websites by providing new guidance designed to foster greater innovation and best practice. As an incentive, the commission agreed to allow companies, if they meet certain conditions, to use their websites and blogs to satisfy the requirements of Regulation FD.
The SEC’s 2008 Mandatory Disclosure Document Telephone Survey, released the day after the SEC announced its new company website guidance, was made available as part of the unrelated proposed new mutual fund disclosures the SEC plans to introduce. Consequently, parts of the survey report that deal with investors’ use of corporate annual reports and proxy statements have been removed from the document posted on the SEC’s website.
However, the report includes a range of information about investors’ Internet use that is highly relevant to investor relations website managers. The survey was conducted by national survey research firm Abt SRBI, which interviewed 1,000 adults who invest in stocks, bonds and/or mutual funds outside of an employer-sponsored retirement plan, which represents about 26% of all American households.
Conducted from March 17, 2008 to May 9, 2008, the survey included questions about where these investors typically go for investment information, their investment literacy, and information about their investments and household characteristics.
Mutual funds and stocks most common
Among the 1,000 investors interviewed, 77% owned stocks, 48% owned bonds, and 82% owned mutual funds. There was a lot of overlap between the different investment types, with 36% of investors having a portfolio that includes all three investment types. Another 25% owned both stocks and mutual funds, but not bonds. Some 17% owned only mutual funds, 11% owned only stocks, and 2% only bonds.
71% trade yearly or less often
All investors were asked how often they bought stocks, bonds, or mutual funds, not including 401(K) plans or other employer-sponsored retirement programs. Most 71% said they do so yearly or less. Some 21% said they trade securities monthly. Only 3% said they trade securities on a weekly bases, while just 1% said they trade daily.
Almost three quarters have a financial advisor or broker
Fully 71% of all investors report having a financial advisor or broker. In general, the more diversified an investor’s porfolio, the more likely they are to have a financial advisor. About 80% of investors who owned stocks, bonds and mutual funds or bonds and mutual funds reported having a financial advisor. Slightly fewer of the investors who owned stocks and mutual funds (73%) or stocks and bonds (70%) had a financial advisor. In contrast, only 67% of those who owned only mutual funds, 51% of those who owned only stocks, and 50% of those who owned only bonds reported having a financial advisor.
Financial advisors the main source of information
Investors were asked what main sources of information they use to guide their decisions when buying stocks, bonds and mutual funds. Multiple responses were allowed to this question, and nearly 30% of respondents mentioned more than one “main” source of information. Getting information from a financial advisor or broker was the most common response, followed by the Internet or computer, friends and family, magazines and newspapers. Ten percent cited some other source, while an additional 8% said they didn’t know what their main source was. Only 5% mentioned prospectus and 3% cited annual reports.
Female respondents, those age 60 or more, and those with low investment literacy scores were more likely than other respondents to say they use a financial advisor or broker. In contrast, more highly educated respondents tend to say that they use annual reports, prospectuses, magazines, newsletters, and the Internet as sources of investment information, compared with less educated investors.
Financial advisors very influential
Investors with a financial advisor or broker were asked how much influence the financial advisor has in their investment decisions. About 22% of investors reported that their financial advisor has complete influence on their investment decisions. Most commonly, 42% said their financial advisor has a lot of influence. Only the other hand, 26% said their advisor has little influence, while 9% said their broker or advisor has no influence on their decision to buy or sell stocks, bonds or mutual funds.
90% have Internet access
Fully 90% of investors said they had access to the Internet. Most of these investors had Internet access both at home and work (57%), while 30% only had access at home, and 3% only had access at work. Some 10% of investors did not have Internet access.
55% of stock investors use web for investment information
Regardless of the source of information used to guide investment decisions, investors who used information to guide their decisions were asked if they access that information over the Internet. Among investors who own stocks, 55% said they access information via the Internet. A similar proportion of those who own bonds (53%) and mutual funds (53%) said they access their source of investment information via the Internet.
Fully 62% of male investors say they use the Internet as a source of investment information, compared to 39% of women. Use of the Internet for investment information is also positively associated with investment literacy, household income and education.
30% rely on web completely or a lot
Only 5% of investors said they rely on information from the Internet completely, while 25% said they relied on it a lot to guide their investment decisions. Some 26% said they rely on it a little. Fully 44% of investors said they do not rely on Internet information at all for investment information.
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| Individual company websites are the most commonly cited investment information sources by retail investors. |
Company websites most common resource
Investors who accessed information over the Internet to guide their investment decisions were asked where they go on the Internet to get that information. The most often mentioned sources were individual company websites (38%), followed by private financial investment information websites (24%), specific funds (10%), Yahoo (9%) and news or newspaper sites (8%). Only about 1% of investors who use the Internet cited the SEC website and other government agency websites.
Fully 49% women investors who turn to the Internet for investment information use individual company websites, compared with 42% of men. Some 16% of respondents with high investment scores consulted Yahoo! during their online research, compared with 1% of respondents with low scores.
86% say they do not use blogs
Of those investors who rely on Internet information at least a little to guide their investment decisions, only 13% said they use blogs. Most of these investors said they use blogs for less than half of their investment information (12%). Fully 86% of investors who use Internet information for guiding their investment decisions said that they do not use blogs at all.
To access the complete survey in PDF: http://www.sec.gov/comments/s7-28-07/s72807-142-phone.pdf
Dominic Jones (bio) created IR Web Report in 2001. He is a consultant to leading public companies and investor relations service providers worldwide. You can contact him via the contacts page.
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